According to an article dated December 20, 2007, an appeals court has revived a class action against Bear, Stearns & Co. after overturning a federal judge's order granting settlement with shareholders who implicated the broker in a fraud scheme that led to the collapse of now-defunct securities firm Sterling Foster & Co. The U.S. Appeals Court for the Second Circuit vacated the settlement and returned the case to the lower court, ruling Wednesday that the settlement was reached before sufficient inquiry into evidence of Bear Stearns' wrongdoing and is, accordingly, unfair. ... The suit was filed in 1999 on behalf of shareholders who purchased ML Direct Inc. stock through Sterling Foster between September and December of 1996. Bear Stearns and its subsidiary were named as defendants for their role as clearing broker. ... The case is Robert Levitt et al v Thomas Rogers et al, case number 06-cv-5298, in the U.S. Court of Appeals for the Second Circuit. [The original case, Levitt, et al. v. Bear Stearns, et al.," civil docket number 99-cv-02789, is managed with In Re Sterling Foster & Co., Inc., Securities Litigation, MDL Docket No. 1208.]
On November 2, 2006, the Court entered Judgment approving the settlement and dismissing the claims against the settling defendants with prejudice. On November 16, 2006, a notice of appeal was filed with respect to claims relating to the ML Direct, Inc.
According to the docket, on June 5, 2006, a Stipulation and Agreement of Settlement with Defendants Krasnoff, Shalek, Lasergate and the Bear Stearns Defendants was filed. According to the Stipulation, four Settlement Funds totaling $1,400,000 in cash, plus interest, have been established.
Previously, on October 28, 1997, the U.S. District Judge Denis R. Hurley consolidated the cases with 97cv189 as the lead case. Goodkind Labaton Rudoff & Sucharow and Milberg Weiss Bershad Hynes & Lerach were appointed as co-lead counsel. On December 1, 1997, the plaintiffs filed an Amended and Consolidated Class Action Complaint. The defendants responded by filing motions to dismiss the Amended and Consolidated Class Action Complaint in August 1998. On February 17, 1999, the plaintiffs filed a Second Amended Complaint and the defendants again responded by filing motions to dismiss the Second Amended Complaint. On June 27, 2002, U.S. District Judge Arthur D. Spatt issued the Memorandum and Order granting in part and denying in part a motion to dismiss. According to the Order: claims brought pursuant to Section 12(a)(2) are dismissed; claims against Bear Stearns Defendants and Individual Applewoods Defendants are dismissed on statute of limitations grounds; and, motions by Pace, Novich, Shalek and Krasnoff to stay the action pending the resolution of the criminal proceedings against them are denied.
On April 28, 1997, U.S. District Judge Catherine D. Perry issued the Order granting the motion to transfer the action from the U.S. District Court for the Eastern District of Missouri to the U.S. District Court for the Eastern District of New York. Several similar actions are being managed under In Re Sterling Foster & Co., Inc., Securities Litigation, MDL Docket No. 1208.
The Complaint claims that plaintiff members were fraudulently induced to purchase shares of the above-referenced stocks at artificially inflated prices. The Complaint alleges that Defendant in order to effectuate such sales engaged in acts and conduct in violation of the Securities Exchange Act and Rule 10(b)5 promulgated thereunder by the Securities and Exchange Commission. Plaintiff further alleges that Defendant employed devices, schemes or artifices to defraud, obtained money or property by means of untrue statements of material facts or omitted to state material facts necessary in order to make the statements made in light of the circumstances under which they were made, not misleading, and engaged in transactions, practices, or courses of business which operated as a fraud on Purchasers of the above-referenced stock.
Specifically, the complaint charges that defendants, prior to the IPO, secured contracts between themselves and certain shareholders to purchase all or large portions of those shareholders' companies stockholdings at prices well below the IPO's asking price, took "short" selling positions in these companies securities, and then "covered" their short positions with the shares of stock and/or warrants they had previously agreed to purchase. As a result of their issuance of materially false and misleading statements in connection with the sale of the listed companies stock, and as a result of their manipulation of the trading price of their stock, plaintiff and other members of the Class purchased their Advanced Voice shares at artificially inflated prices.
In general, this class action involves allegations by the plaintiffs that the defendants made misstatements and omissions and were engaged in market manipulation with respect to six public offerings listed with their respective class periods: Advanced Voice Technologies, Inc. (2/6/1995 - 10/8/1996); Comtech Communication Technologies, Inc. (8/23/1995 - 10/8/1996); Embryo Development Corporation (11/17/1995 - 10/8/1996); Applewoods, Inc. (4/10/1996 - 10/8/1996); ML Direct, Inc. (9/3/1996 - 10/8/1996); and Lasergate (10/17/1994 - 10/8/1996).
Several class action complaints were filed in the U.S. District Court for the Eastern District of New York.
